Most successful organizations have a CEO who knows how to improve productivity by running the “hard side” of his or her company very well. This hard side is represented by a company’s tangible investments — facilities, technology, new distribution channels, and new business ventures. These investments almost always improve a CEO’s top and bottom line. But long-term gains from these tangibles dwindle, leaving executives scratching their heads and searching for other ways to pump up productivity. Too often, though, they ignore the company’s most valuable asset — its people. Its “soft side.”
In Transforming the Bottom Line, authors Tony and Jeremy Hope note an important link between employee satisfaction and customer satisfaction. They write, “Employee satisfaction is the central ingredient in understanding the relationship between customer service and profitability.” What’s the correlation between satisfied employees and increased revenues? Simple. Satisfied employees provide better customer service . . . better customer service leads to repeat business and referrals.
Take, for example, Taco Bell’s recent findings in its in-house analysis. The Hopes said that stores with top customer satisfaction outperformed the others in profits. Not surprisingly, the company also discovered that 20 percent of stores with the highest employee satisfaction also boasted the highest sales and profits.
Other studies have turned up similar results. Surveys performed at Motorola and Xerox demonstrated enormous returns from improved employee satisfaction and customer retention, reported Doug Snetsinger and Greg Pellett in their article, “Making Employee Research Pay Off.” In each case, these companies demonstrated that a bottom line would vastly improve with minimal capital investment and maximum investment in people.
So, if the key to such substantial growth is employee satisfaction leading to member retention, why haven’t executives whole-heartedly embraced this issue? There are a few reasons. Most executives already believe that the soft side of the business has some impact on revenue. What they haven’t seemed to recognize is just how much impact the soft side has. Add to that the fact that many human resource professionals shudder at people being managed in the same way as a “hard” investment. Many CEOs seem to make decisions by assigning quantifiable values to the various elements of an equation. The question is: How do you assign such a value to people? Handling people as a factor in an equation makes executives, understandably, uncomfortable.
What is groundbreaking is that the soft side can be measured with the same amount of certainty as the hard side. This doesn’t mean that executives equating people with bottom line results lose sight of the “humanity” issue. In fact, CEOs must mine those positive elements of human nature to find their gold.
There are two ways companies can measure employee satisfaction. These areas have been highlighted by the Employment Policy Foundation. In its study, Employee Involvement, the Foundation cites empirical research, which concluded higher productivity when its employees had greater involvement, leading to satisfaction. In some cases, employee involvement increased productivity as much as 18-to-25 percent. The second area noted by the Foundation report was incentive reward systems. Such rewards could increase a company’s productivity by as much as 3-to-26 percent. Used together, these have a potential productivity increase of over 50 percent!
Not only do employees need to feel valued, but most would also agree that their satisfaction includes how they feel about their company’s purpose, their job and colleagues, and the way work gets done. These feelings can be directly influenced by an employee’s perception about the organization’s leadership. Leadership in a highly productive organization is the result of the leadership capabilities of everyone in the organization who is in any kind of supervisory role.
According to current research, how effective a company’s leaders are can be determined by how well they communicate the answers to the following questions:
• Do employees know the purpose of the organization and teams?
• Do employees know what their specific goals are?
• Do employees get frequent feedback on their performance?
• Are employees recognized and rewarded properly?
• Does the company provide individual development, training, tools, and support to do the work?
• Do employees feel they can meet their customers’ needs?
Once an organization has examined how well it meets employee satisfaction issues, it can set targets and work in specific areas to improve.
What’s more, the steps leading to employee satisfaction involve little capital investment and can be continuously improved upon without additional expense. CEOs and other company executives can attain those extra dollars with changes that complement the company’s hard side — by tapping into its soft side.